Close Open Orders: 2008-10-20 10:00
Since my post, NZD/USD made a high around .6350, then dropped and remains in a range between .6050 – .6200. It does not look like we’ll get much action from this pair right now as uncertainty rules the market, so I will close my open orders and search for opportunities elsewhere.
Close Open Orders. No Trade.
Trade Idea: 2008-10-14 13:56
Greetings! It looks like we have a possible short opportunity forming on NZD/USD. We’re currently seeing a boost higher in risk across the board in currencies on new bailout plans from across the world, so is this another opportunity to short a correction?
Longer term I like a short on this play because even though the new bailout plans may bring back buyers and confidence in the short term, it doesn’t fix the outlook that we are heading into a recession. This means slow to negative growth and less demand for commodities – a large component of New Zealand’s exports. Also, continued de-leveraging of carry trades should bring more selling of higher yielding currencies and more flow back into funding and safe haven currencies like the US Dollar.
On the chart, I used the Fibonacci tool to pick out potential entry levels on a correction. Today the pair strongly reacted to the 38% Fibonacci area and turned lower. I feel that this is just one test as we can see bullish divergence in the stochastics as there are higher “lows” vs. lower “lows” in price. So, we may see the pair move higher before it drops down again. I’d like to short around the 50% Fib area if the pair makes it that far. I’m going to use a wide stop of 200 pips, so I’ll definitely have to cut down my position size to stay within my 1% risk per trade limit. Here’s what I’m going to do:
Short NZD/USD at .6400, stop at .6600, pt1 at .6200, pt2 at .6000
Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly.
Stay tuned for updates!